Click to Enlarge Dividend Yield: 5.5%
Realty Income (O) is known as the “Monthly Dividend Company.”
Realty Income has been a dividend-paying and dividend-raising monster since going public in 1994. In 19 years, it has made 519 dividend payments and hiked its dividend 73 times.
Realty Income’s conservative portfolio of triple-net-leased properties has been a rock of consistency throughout the past five years of on-again, off-again crisis. But that bond-like stability is exactly what is hurting O stock today.
Because Realty Income locks its tenants into long-term leases, rents tend to rise slowly and consistently. That’s great during a time of stable or falling bond yields, but when yields are soaring — as they are today — it makes the REIT less attractive as a bond substitute.
At $40, Realty Income sports a current dividend yield of 5.5%. And again, the payout will almost certainly grow with time, raising your yield on cost. Given the quality of the portfolio — and given its history of weathering crisis — I would gladly take 5.5% from Realty income over 2.7% from “safe” Treasuries from a bankrupt and disfunctional federal government.
Recommendation: Buy O at or below $42. I’m actually comfortable buying at higher prices, but I see no reason to pay them at this time. Be patient and accumulate new shares every time we get a taper scare. You’re locking in a great yield on a stock you can hold forever. And yes, I mean “forever” literally.